The three-dimensional printing company announced that it would price a public offering of 5.95 million shares of common stock in order to raise an additional $317 million. The company also granted underwriter Canaccord Genuity the option to buy an additional 892,500 shares of common stock for 30 days.
3D Systems had 103.9 million shares outstanding. Existing shareholders would be diluted about 5.8% and as much as 6.5% if Canaccord exercises its option. Shares fell far more than the dilution amount by midday, however. They were down 10.4% by 1p.m.
The price action led some investors on StockTwits.com to argue that management picked a poor time to raise additional capital with a share offering. 3D shares are down more than 41% from an all-time-high of $97.28 hit in January, indicating that shareholders already doubt the company's ability to return value and make the right kind of investments.
$DDD what a terrible management.? Mick (@MickeTrader) May. 28 at 11:36 AM
$DDD they should of done this secondary at 90 to get more money lol smh on management? Kay (@HookEM) May. 28 at 09:49 AM
Moreover, 3D is facing more competition in the three-dimensional printing arena that will make justifying its 42X price to 2015 earnings multiple more difficult. Hewlett-Packard (HP) management has promised that it will have a 3D product by the end of the fiscal year on Oct. 31.
However, secondary timing aside, sentiment on 3D remained overwhelmingly bullish Wednesday according to StockTwits' analytics. About 71% of StockTwits' users believe 3D will go up and that Wednesday's selling provided a buying opportunity. The crowd speculated that 3D has an acquisition lined up that will improve its printer offerings and ultimately drive enough value for shareholders to outweigh the dilution.
$DDD its a 6% dilution and they are using the proceeds for growth. As a long term investor i am not even sweating this overreaction.? Dan Starr (@DanStarr) May. 28 at 10:56 AM
$DDD I think the dilution will hurt stock value for next 1-2 months but if the money is used wisely to grow it's worth every penny long-term? Gregory (@Nethunz) May. 28 at 01:25 AM
3D has a history of acquiring modeling companies, smaller printer competitors and sales partners. The company acquired Brazil-based Robotec in April to help distribute its 3D printers in Latin America. It has made nearly 50 acquisitions in the past three years.
Investors said Wednesday that prior acquisitions have driven shares higher in the past. And they expect that 3D will spend its money wisely enough to grow value.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.